Cove Point Terminal

The Dominion Energy Cove Point liquefied natural gas (LNG) facility in Maryland exported its first LNG cargo during its final stage of commissioning on March 1, 2018, on Royal Dutch Shell Plc’s LNG carrier, Gemmata, with a capacity of 3.0 billion cubic feet (Bcf). Its destination and buyer are unknown. The Federal Energy Regulatory Committee (FERC) granted approval for Cove Point to officially begin commercial operations on March 5. The Methane Spirit will likely be the next vessel to export Cove Point LNG at the end of March.

Cove Point has a design capacity to liquefy up to 0.75 billion cubic feet per day (Bcf/d) of natural gas. The natural gas is sourced from the high-producing Marcellus and Utica shale plays. Cove Point is the only LNG export facility on the east coast of the United States and the second export facility operating in the Lower 48 states after Sabine Pass in Louisiana, which began commercial operations in 2016.

Cove Point began receiving natural gas feedstock deliveries for LNG production in early December 2017. Two LNG cargoes were imported into Cove Point in December 2017 and January 2018 as cool down cargoes, which is the standard practice for preparing and testing liquefaction equipment systems for LNG production. According to S&P Global Platts Bentek Energy, the implied pipeline feedgas deliveries to the Cove Point terminal averaged 0.25 Bcf/d in February and increased to 0.45 Bcf/d in the two weeks leading up to the export. On the day of export, the pipeline deliveries decreased from a high of 920 million cubic feet per day (MMcf/d) to 18 MMcf/d.

The U.S. Department of Energy’s Office of Fossil Energy approved Cove Point to export up to 0.77 Bcf/d to non-Free Trade Agreement (FTA) countries. Cove Point liquefaction output is fully subscribed under 20-year service agreements. Half of the marketed capacity will go to a joint venture of Sumitomo Corporation and Tokyo Gas and the other half to India’s state-owned GAIL (India) Ltd. LNG contracted by Japanese buyers will likely be used for power generation in the Tokyo and Kansai metropolitan areas. GAIL is seeking to resell 24 of its Cove Point cargos in tranches of 6 to 12 in 2019 and 2020, which is approximately 40% of its subscribed volume over this time period, assuming average-sized cargos.

EIA’s Short Term Energy Outlook projects that LNG exports will average 2.9 Bcf/d in 2018, up 1 Bcf/d from 2017 levels. By 2019, LNG exports are expected to average 4.8 Bcf/d as new liquefaction capacity comes online.

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